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Early Morning Call: gold price soars as USD falls following weak GDP data

Gold at three-week highs as USD continues its drop, losing most against GBP and JPY, after weak US GDP data showing a technical recession. Earnings today from NWG, STAN, AZN, BNP, AFKLM and RNO.

Indices outlook

US equity markets recorded another positive session yesterday, which didn’t reflect on the APAC region's performance overnight. Hong Kong’s Hang Seng fell as tech stocks came under pressure.

Alibaba Group Holding Ltd (All Sessions) shares dropped for a third day in a row as several Ant Group executives stepped down.

In Japan, industrial production rose by 8.9% in June month-on-month (MoM). Economists were expecting a 3.7% increase. This is the first increase in industrial output since March, and the fastest pace on record, reversing the 7.5% drop recorded the previous month.

Retail sales in Japan also rose but not as much as economists had forecast. The index increased by 1.5% in June year-on-year (YoY). Consensus was 2.8%. The unemployment rate in the country meanwhile stood at 2.6% in June.

Currencies

On the currency market, the greenback extended its losses overnight, continuing the trend that started when it was announced that the US economy shrank by 0.9% in the second quarter (Q2), missing forecasts of an expansion of 0.4%.

Gold reacted positively to US gross domestic product (GDP) news, and extended gains overnight and now trades at three-week highs.

This morning, economists await preliminary growth figures for Q2 across Europe. France has already published its data: +0.5% in Q2. Economists were expecting an expansion of 0.2%, after -0.2% the previous three months.

At 9am, Germany GDP is expected to rise only by 0.1%, decelerating from 0.2% growth in the first quarter (Q1). And an hour later, eurozone growth data is expected. The economy in the euro area is expected to expand by 0.2%, after a 0.6% expansion the previous quarter.

In the US, personal income and spending data for June is scheduled at 1.30pm, as well as the Federal Reserve’s (Fed) favoured reading of inflation: core PCE price index is expected at 4.7% YoY, unchanged from last month.

Corporate news

On the corporate front, there were many earnings releases yesterday and overnight.

NatWest Group PLC posted better-than-expected profit for the first-half (H1) of the year. Pre-tax profit came in at £2.6 billion, up from £2.3bn the previous year and ahead of the £2.2bn average of analyst forecasts compiled by the bank. It also announced a 16.8p special dividend amounting to £1.75bn.

Standard Chartered PLC (LSE) reported a better than forecast pre-tax profit in the first half, rising 19% to $2.8bn, increased its interim dividend and announced a $500 million share buyback.

AstraZeneca PLC raised its full-year (FY) revenue guidance after beating earnings forecasts. It now expects revenue to rise by a percentage point in the low twenties rather than the high teens forecast previously.

In Europe, BNP Paribas SA recorded a better-than-expected revenue in Q2, with CIB revenue rising 16%, and FICC Trading revenue up by 14.8%.

Renault SA posted a €1.36bn net loss in the first half of this year from the cost of closing its Russian business but said operating margins in H1 were 4.7%, against 2.1% in the same period last year. The French car maker raised its forecast for full year margins to more than 5% from a forecast of 3% previously.

In the US, Apple Inc (All Sessions) stock rose in extended hours trading, after posting marginally better-than-expected earnings and revenue and announcing forecasted faster sales growth and sustained strong iPhone demand.

Amazon.com Inc (All Sessions) shares jumped in extended trading on Thursday after the company reported better-than-expected second quarter revenue, including advertising revenue, and gave an optimistic outlook. Revenue came in at $121.23bn, $2bn more than expected, bucking the trend among its tech peers, which have all reported disappointing results.

On the other hand, chip maker Intel Corp (All Sessions) reported lower sales for a second straight quarter and gave a gloomy sales outlook, sending the stock down 9% in extended trade. Intel said sales in the second quarter fell 22% to $15.3bn, missing Wall Street's expectations. It generated a net loss of $454m, compared with a profit of $5.75bn this time last year.


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